Regulators Nix CLT-Ufa, Kirch Plan for Premiere

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Berlin -- Germany's cartel office, the
Bundeskartelamt, blocked plans by media companies CLT-Ufa and Kirch to increase their
stakes in the pay TV programming operation Premier to 50 percent each.

Both companies control about 90 percent of the German
broadcast TV market. Regulators feared joint control of Premiere would give them undue
power, especially in areas like program acquisition.

The cartel office's decision was not entirely
unexpected; it made the same argument to European Commission regulators earlier this year
when it recommended that the EC block the merger of Premiere and DF1, Kirch's German
DTH platform.

Kirch currently owns 25 percent of Premiere and
Luxembourg-based CLT-Ufa owns 37.5 percent. French pay TV company Canal Plus agreed to
sell its 37.5 percent holding in Premiere to Kirch under the condition that Kirch would
sell part of it to another investor -- CLT-Ufa.

Premiere claims about 1.65 million subscribers, of which
about 250,000 receive its digital service. DF1 now has about 200,000 subscribers.

CLT-Ufa said it may appeal the antitrust office's
decision. "We are already in management control," a CLT-Ufa spokesman said.
"The 50 percent shareholding situation would have changed nothing."

With the antitrust decision, the future of digital pay TV
in Germany is more unclear, even to those deeply involved. "We don't know what
will happen," a CLT-Ufa executive said.

Prior to the decision, Thomas Middelhoff, designated
chairman of Bertelsmann AG -- which is a 50 percent shareholder in CLT-Ufa and manages its
German activities -- had said backing out of Premiere entirely would have been an option.

Analysts considered his statements a strategic move to put
pressure on the cartel office, but the confusing situation in Germany's digital pay
TV industry may leave the possibility open. What's more, new equity partners in
Premiere may provide some clarity.

Local media recently reported that German publisher WAZ and
French media group Hachette could buy into Premiere. Axel Springer AG, another German
publisher 40 percent owned by Kirch, is also thought to be interested in Premiere.

Torsten Kreindl, head of Deutsche Telekom AG's cable
unit -- which launched its own digital services this month -- said he does not expect the
unclear scenario at Premiere to affect his business.

"It does not matter how close our clients Premiere and
DF1 work together," he said.

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